SETH MICHAEL MEYER
Staff Writer
When fictional president from House of Cards, Frank Underwood, announced his plan to guarantee a job for every American, everything I knew about economics cringed, and it’s cringing now.
Senator Bernie Sanders, an Independent from Vermont, made for a unique presidential candidate by being open about his love for socialist policies. Ultimately, Americans weren’t vying for such an agenda and, well — he’s still just a senator.
Last week, the Washington Post reported that Sanders, who may be running again for the 2020 nomination, will announce his plans to guarantee a job to every American “who wants or needs one.” These jobs, the Post reports, will pay at least $15 per hour and include medical benefits.
How would this work, exactly? Well, an analysis, also done by the Post, of an early draft of the proposal says it would “fund hundreds of projects throughout the United States aimed at addressing priorities such as infrastructure, care giving, the environment, education and other goals.”
In ponderance of the rationality of this plan, I find three glaring issues, the last of which I will happily expand upon.
First issue: a representative from the Sanders’ office has admitted they do not know how much it would cost and they don’t know how to fund it. I am very confident that when those decisions are made public, it will be a financial and logistical nightmare.
Second issue: this “job-guarantee” grossly implies that Americans are entitled to employment and that is simply not the case. The paradigm of having a right to someone else’s property or service (in this case employment via taxpayer money) simply because you breathe is unjust and chaotic.
“I’m your next-door neighbor and I need more room for my stuff, so I’m entitled to the room in your house” is a sentence drawn out of a very barbaric world.
My third issue is one that I will explain in detail. This plan, needing not to look at the details, is simply poor economics. Sanders has failed to acknowledge the negative impact of drastic minimum wage increases such as causing greater unemployment, a concept outlined by a study conducted by Jonathan Meer and Jeremy West, published by the National Bureau of Economics Research.
In summary, the report finds that “the minimum wage reduces job growth over a period of several years. These effects are most pronounced for younger workers and in industries with a higher proportion of low-wage workers.”
This job guarantee would consequently then force more people to rely on the government than the current unemployment rate.
When a government subsidizes the economy, even in the least bit, it has the potential to eliminate businesses. If the government can use a bottomless pit of “wealth” (more specifically, deficit spending), to write checks of $15 per hour to anyone who wants it, private entities that can’t match that will fail, which will consequently allow for the government to have unwarranted influence in the economy. Those private businesses that can keep up with the government strong-arm will still need to cut their labor force.
In a free market, the natural supply and demand forces ultimately lower the prices of goods and services. Similarly, the supply of labor capital (the unemployed labor force) and the demand for labor (employers who need workers) ultimately lower wages.
In congruence, these two forces can work in favor for both the employee and employer, but when just wages are artificially set, it will cause unemployment, furthering the cost of this charitable legislation.
Tim Worstall, a contributor to Forbes magazine, analyzes western European countries with and without minimum wages. He notes that those countries who have minimum wages also have a median unemployment rate of 11.1 percent. Of the countries without minimum wage, their median unemployment rate is 5.5 percent.
“Still want to raise our minimum wage?” asks Worstall. “Germany used to have really high unemployment. Then they did labor reforms to allow more low wage jobs, combined with subsidies for low wage workers. Now they don’t have high unemployment.”
According to OECD.org, the unemployment rate in the U.S. is 4.1 percent, which is lower than most well developed countries including the United Kingdom, Switzerland and Canada. The majority of unemployment we do see in the U.S. is not prolonged, lasting less than five weeks, the Bureau of Labor Statistics reports. With our relatively low and mostly short-term unemployment here in the U.S., Sanders’ socialist-inspired plan is not worth jeopardizing the free market, which has sustained us as the world’s largest economy.
Some may argue that since the details of this legislation are not clear, it is too soon to criticize, but I reject that argument entirely.
It is important to oppose any notion that suggests the state should be in such great control of the nation’s economy. It is no secret that China could not have succeeded as well as it is now if they hadn’t steered away from a state-planned economy. Socialism is bad — let’s reject it in its infancy.